We show how optimal saving in a two-period model is affected when prudence and risk aversion of the underlying utility … function change. Increasing prudence alone will induce higher savings only if, for certain combinations of the interest rate … and the pure time discount rate, there is distributional neutrality between the two periods. Otherwise, changes of risk …

We analyze optimal taxation of labor and capital income in a life-cycle framework with idiosyncratic income risk. We … independent of the social welfare function and determined by the degree of income risk and risk aversion. The optimal linear … provide a novel decomposition of labor income tax formulas into a redistribution and an insurance component. The latter is …

data. How these differences affect saving in theoretical models depends on the metric one uses for risk. For labor-income …How does risk affect saving? Empirical work typically examines the effects of detectible differences in risk within the … risk, second-degree increases in risk require prudence to induce increased saving demand. However, prudence is not …

of capital income taxation is explained by the low interest elasticity of precautionary savings compared to that of life … of a tax reform. Based on this aggregate efficiency measure, we find a much lower capital income tax rate and a … significantly less progressive labor income tax schedule than Conesa et al. (2009) to be optimal. As we demonstrate, the optimality …

-form expressions of welfare loss from shocks and epistemological uncertainty identify the interaction of (intertemporal) risk attitude …

This paper analyzes optimal linear taxes on labor income and savings in a standard two-period life-cycle model with … endogenous leisure demands in both periods and non-insurable income risks. Households are subject to skill shocks in both periods … more attractive for social insurance if a larger part of risk is realized in the first period of the life-cycle. Our …

assumption of (intertemporal) risk neutrality reduces the growth effect in social discounting and significantly amplifies the … importance of risk and correlation. Second, debate and models largely overlook the difference in attitude with respect to risk … and with respect to non-risk uncertainty. The paper derives the resulting changes of the risk-free and the stochastic …

data. How these differences affect saving in theoretical models depends on the metric one uses for risk. For labor-income …How does risk affect saving? Empirical work typically examines the effects of detectible differences in risk within the … risk, second-degree increases in risk require prudence to induce increased saving demand. However, prudence is not …

function change. Increasing prudence alone will induce higher savings only if, for certain combinations of the interest rate … and the pure time discount rate, there is distributional neutrality between the two periods. Otherwise, changes of risk …

Using detailed tax data from the Swiss canton of Bern, I examine how changes in wealth are related to income risk. I … find that only among elderly individuals high kurtosis of income risk may be positively correlated with wealth accumulation … wealth investors experience sharp increases in wealth and income in subsequent periods. Finally, wealth risk is more …